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Yangon University of Economics Department of Commerce Master of Banking and Finance Programme

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Yangon University of Economics Department of Commerce Master of Banking and Finance Programme YANGON UNIVERSITY OF ECONOMICS DEPARTMENT OF COMMERCE MASTER OF BANKING AND FINANCE PROGRAMME ANALYSIS ON CORPORATE GOVERNANCE PRACTICES OF YOMA BANK LIMTIED SU YATI MBF (DAY) 1ST BATCH OCTOBER, 2019 ANALYSIS ON CORPORATE GOVERNANCE PRACTICES OF YOMA BANK LIMTIED A thesis submitted as a partial fulfillment towards the requirements for the degree of Master of Banking and Finance (MBF) Supervised by Submitted by Prof. Dr. Soe Thu Su Yati Head of Department Roll No. 64 Department of Commerce MBF (Day) 1st Batch Yangon University of Economics 2017-2019 ACCEPTANCE Accepted by the Board of Examiners of the MBF Programme, Department of Commerce, Yangon University of Economics, in partial fulfillment for the requirement of the Master of Banking and Finance (MBF). BOARD OF EXAMINERS ---------------------------------- (Chairman) Prof. Dr. U Tin Win Rector Yangon University of Economics ---------------------------------- ---------------------------------- (Supervisor) (Examiner) Prof. Dr. Daw Soe Thu Prof. Dr. Tin Tin Htwe Professor and Head Professor Department of Commerce Department of Commerce Yangon University of Economics Yangon University of Economics ---------------------------------- ---------------------------------- (Examiner) (Examiner) Prof. Dr. Aye Thu Htun Daw Khin Nwe Ohn Professor Associate Professor Department of Commerce Department of Commerce Yangon University of Economics Yangon University of Economics OCTOBER, 2019 ABSTRACT This paper was presented on the analysis of Corporate Governance practices of Yoma Bank. The analysis focuses on compliance of Corporate Governance practices of Yoma Bank Limited on CBM regulations. Yoma Bank is one of the earliest banks that have established a Corporate Governance framework and practices. The study presents about the analysis on compliance of CG practices of Yoma Bank with five categories. These five categories include compliance of CG practices by the Board of Directors, compliance of CG practices by Senior Management, compliance of CG practices by Majority Shareholders, compliance of CG practices in Risk Management, and compliance of CG practices by Compliance and Internal Audit teams. Analysis of the study was based on the compliance of regulatory standards enacted by CBM in terms of laws, regulations, directives, instructions, and guidelines. The study was analyzed from both primary and secondary data. Primary data was collected from interviewing of relevant CG stakeholders in Yoma Bank. There were 20 respondents participated in the 44 questionnaires. The questionnaires were prepared based on the CBM’s Financial Institutions Law, Directives, and Guidelines. The study presented its findings on compliance of Yoma Bank’s CG practices as well-complied on CBM regulations and follows the major regulatory requirements with well-prepared policies and procedures. Compliance of CG practices by the Board of Directors is the most compliance part of Yoma Bank’s CG practices and compliance of CG practices in Risk Management is the least compliance part. However, there is a well-structured Risk Management framework that the bank practices in accordance with CBM regulations. i ACKNOWLEDGEMENTS First of all, I would like to express my sincere gratitude to Professor Dr. Tin Win, Rector of Yangon University of Economics, for his concern and encouragement to MBF programme. Secondly, I would like to appreciate Professor Dr. Nilar Myint Htoo, Pro Rector of Yangon University of Economics, for her encouragement to MBF programme. Thirdly, my deepest gratitude and appreciation to Professor Dr. Soe Thu, Programme Director of Master of Banking and Finance Programme and Head of Department, Department of Commerce, Yangon University of Economics, for all her dedication, invaluable. and inspiring advises to complete this research paper. As a supervisor, she has provided precious guidance, and commitment of time, as well as supported the preparation and writing of this research paper thesis. Without her kind support, it would not be possible to complete my thesis within six months. I would like to express my deep thanks to all professors, lectures, instructors, visiting lecturers, and all my classmates from Day First Batch of Master of Banking and Finance programme, Yangon University of Economics. My sincere appreciation to the Chairman, Board of Directors, and Senior Management of Yoma Bank Limited for inspirations and kind supports in answering my survey questions, which drives me to make this research paper possible. I would also like to thank U Htin Kyaw Thein for all his valuable suggestions, guidance, and advises through the entire MBF programme from admission exam to thesis writing, not only as a colleague, but also as a senior of MBF programme. I would like to express my sincere gratitude to my Executive Director of Yoma Bank Limited for her understanding and letting me attend this programme and my colleagues from Corporate Secretary Office, who always support me whenever I need. Finally, I would like to appreciate all the unconditional supports from my parents and my younger sister for everything they had done for me. It could not be possible to accomplish such achievement without them. ii CONTENTS Page ABSTRACT i ACKNOWLEDGEMENTS ii TABLE OF CONTENTS iii LIST OF TABLES v LIST OF FIGURES vi LIST OF ABBREVIATIONS vii CHAPTER 1 INTRODUCTION 1 1.1 Rationale of the Study 1 1.2 Objectives of the Study 2 1.3 Scope and Method of the Study 3 1.4 Organization of the Study 3 CHAPTER 2 THEORETICAL BACKGROUND 5 2.1 Definitions of Corporate Governance 5 2.2 Theories of Corporate Governance 6 2.3 Corporate Governance Approaches 8 2.4 OECD Principles of Corporate Governance 10 2.5 Basel Committee on Banking Supervision 11 2.6 Corporate Governance Practices Regulated By the Central Bank 12 of Myanmar (CBM) CHAPTER 3 OVERVIEW OF YOMA BANK LIMITED 17 3.1 Background of Yoma Bank Limited 17 3.2 Corporate Governance Practices of Yoma Bank 20 3.3 Group-level Corporate Governance Framework of First 26 Myanmar Investment Public Co., Ltd. (FMI) iii 3.4 Regulatory Framework of Corporate Governance for Financial 28 Institutions in Myanmar CHAPTER 4 ANALYSIS ON COMPLIANCE OF CORPORATE 31 GOVERNANCE PRACTICES OF YOMA BANK LIMITED 4.1 Research Design 31 4.2 Demographic Profile of Respondents 32 4.3 Analysis on Compliance of Corporate Governance Practices of 36 Yoma Bank 4.4 Comparison on Compliance of Corporate Governance Practices 43 of Yoma Bank CHAPTER 5 CONCLUSION 45 5.1 Findings 45 5.2 Suggestions 47 5.3 Limitation and Needs for Further Studies 48 REFERENCES APPENDIX iv LIST OF TABLES Table No. Description Page 3.1 Roles of Directors in the Board and its Committees 24 4.1 No. of Respondents by Gender 32 4.2 No. of Respondents by Age 33 4.3 No. of Respondents by Marital Status 33 4.4 No. of Respondents by Educational Level 34 4.5 No. of Respondents by Occupational Level 35 4.6 No. of Respondents by Working Experience 35 4.7 Compliance of CG Practices by Board of Directors 36 4.8 Compliance of CG Practices by Senior Management 38 4.9 Compliance of CG Practices by Majority Shareholders 39 4.10 Compliance of CG Practices in Risk Management 40 4.11 Compliance of CG Practices by Compliance and Internal Audit 42 Teams 4.12 Comparison on Compliance of CG Practices of Yoma Bank 43 v LIST OF FIGURES Figure No. Description Page 3.1 Timeline of Yoma Bank History 19 3.2 Corporate Governance Structure of Yoma Bank- Board of 21 Directors 3.3 Corporate Governance Structure of Yoma Bank- Management 22 Committee 4.1 Comparison on Compliance of CG Practices of Yoma Bank 44 vi LIST OF ABBREVIATIONS AGM - Annual General Meeting ALCO - Asset and Liability Committee AML - Anti-Money Laundering BC - Basel Committee BCBS - Basel Committee on Banking Supervision BIS - Bank for International Settlements BOD - Board of Directors CAO - Chief Audit Officer CBM - Central Bank of Myanmar CCG - Centre of Corporate Governance CCO - Chief Compliance Officer CCO - Chief Credit Officer CEO - Chief Executive Officer CFO - Chief Financial Officer CFT - Combating the Financing Terrorism COO - Chief Operating Officer CPO - Chief Performance Officer CRO - Chief Risk Officer CG - Corporate Governance DICA - Directorate of Investment and Company Administration ED - Executive Director FBE - Fusion Banking System FIL - Financial Institutions Law FMI - First Myanmar Investment Public Co., Ltd. FT - Financing of Terrorism vii G10 - Group of Ten G20 - Group of Twenty HDI - Human Development Index IFC - International Finance Corporation IIA - Institute of Internal Auditors INED - Independent Non-Executive Director IT - Information Technology MCA - Myanmar Companies Act MyCO - Myanmar Companies Online MFI - Microfinance Institution MIS - Management Information System ML - Money Laundering MMK - Myanmar Kyat NED - Non-Executive Director NPL - Non-Performing Loan OECD - Organization for Economic Cooperation and Development SEC - Security Exchange Commission SME - Small and Medium Enterprise SOX - Sarbanes-Oxley Act SPSS - Statistical Package for the Social Sciences UK - United Kingdom US - United States/ United States of America USD - United States Dollar YB - Yoma Bank viii CHAPTER 1 INTRODUCTION Corporate Governance (CG) is a set of structures and processes that provide strategic direction and oversight control of the Bank. It includes relationships between the Bank’s shareholders, Board of Directors, and executive bodies for the purpose of creating long-term shareholder value. Effective Corporate Governance is critical to the proper functioning of the banking sector
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